AUDITOR OF

PUBLIC

ACCOUNTS

COMMONWEALTH OF VIRGINIA

VIRGINIA STATE UNIVERSITY

PETERSBURG, VIRGINIA

REPORT ON AUDIT

FOR THE YEAR ENDED

JUNE 30, 1998

AUDIT SUMMARY

Our audit of Virginia State University for the year ended June 30, 1998, found:

• the financial statements are presented fairly, in all material respects;

• no material weaknesses in the internal control structure; however, we did find certain mattersthat we consider reportable conditions;

• instances of noncompliance that are required to be reported; and,

• corrective action of prior audit findings, except for the findings listed on page 3 and detailed onpages 4 through 7.

Our audit findings include the following issues that we explain in detail in the section “InternalControl and Compliance Findings and Recommendations.” The University should:

• Strengthen procedures in its Office of Information Technology to reduce the risk ofunauthorized access to information and protect its information technology resources.

• Improve grant activity management to ensure that grants are not overspent and that budgetinformation is accurately reflected in the accounting system.

- T A B L E O F C O N T E N T S -

AUDIT SUMMARY

INDEPENDENT AUDITOR’S REPORT

Report on Financial Statements

Report on Compliance and on Internal Control Over Financial Reporting

INTERNAL CONTROL AND COMPLIANCE FINDINGS AND RECOMMENDATIONS

FINANCIAL STATEMENTS:

Balance Sheet

Statement of Changes in Fund Balances

Statement of Current Funds Revenues, Expenditures, and Other Changes

Notes to Financial Statements

SUPPLEMENTARY INFORMATION:

Schedule of Auxiliary Enterprises Revenues, Expenditures, and Changes in Fund Balances

UNIVERSITY OFFICIALS

May 14, 1999

The Honorable James S. Gilmore IIIGovernor of Virginia

The Honorable Richard HollandChairman, Joint Legislative Audit and Review Commission

The Board of VisitorsVirginia State University

We have audited the accounts and records of Virginia State University as of and for the year endedJune 30, 1998, and submit herewith our complete reports on financial statements and compliance and internalcontrols.

INDEPENDENT AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS

We have audited the balance sheet of Virginia State University as of June 30, 1998, and the relatedstatements of changes in fund balances and current funds revenues, expenditures, and other changes for theyear then ended. The financial statements are the responsibility of the University’s management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards and the standardsapplicable to financial audits contained in Government Auditing Standards issued by the Comptroller Generalof the United States. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of Virginia State University as of June 30, 1998, and the changes in fund balances andcurrent funds revenues, expenditures, and other changes for the year then ended, in conformity with generallyaccepted accounting principles.

Our audit was performed for the purpose of forming an opinion on the financial statements taken as awhole. The accompanying “Schedule of Auxiliary Enterprises Revenues, Expenditures, and Changes in FundBalances” is presented for the purpose of additional analysis and is not a required part of the financialstatements. The information in that schedule has been subjected to the auditing procedures applied in theaudit of the financial statements and, in our opinion, is fairly presented in all material respects in relation tothe financial statements taken as a whole.

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCEAND ON INTERNAL CONTROL OVER FINANCIAL REPORTING

In planning and performing our audit of the financial statements of Virginia State University as of andfor the year ended June 30, 1998, we considered internal controls over financial reporting and testedcompliance with certain provisions of laws, regulations, contracts, and grants in accordance with generallyaccepted auditing standards and the standards applicable to financial audits contained in GovernmentAuditing Standards. We also determined the status of audit findings contained in our prior report.

Compliance

As part of obtaining reasonable assurance about whether the University’s financial statements are freeof material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,contracts, and grants, noncompliance with which could have a direct and material effect on the determinationof financial statement amounts. However, providing an opinion on compliance with those provisions was notan objective of our audit and, accordingly, we do not express such an opinion. The results of our testsdisclosed instances of noncompliance that are required to be reported under Government Auditing Standardswhich are described in the section entitled, “Internal Control and Compliance Findings andRecommendations.”

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the University’s internal control over financialreporting in order to determine our auditing procedures for the purpose of expressing our opinion on thefinancial statements and not to provide assurance on the internal control over financial reporting. However,we noted certain matters involving the internal control over financial reporting and its operation that weconsider to be reportable conditions. Reportable conditions involve matters coming to our attention relatingto significant deficiencies in the design or operation of the internal control over financial reporting that, in ourjudgment, could adversely affect the University’s ability to record, process, summarize, and report financialdata consistent with the assertions of management in the financial statements. Reportable conditions aredescribed in the section entitled, “Internal Control and Compliance Findings and Recommendations.”

We believe none of the reportable conditions described above are material weaknesses. A materialweakness is a condition in which the design or operation of one or more of the internal control componentsdoes not reduce to a relatively low level the risk that misstatements in amounts that would be material inrelation to the financial statements being audited may occur and not be detected within a timely period byemployees in the normal course of performing their assigned functions. Our consideration of the internalcontrol over financial reporting would not necessarily disclose all matters in the internal control structure thatmight be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions thatare also considered to be material weaknesses.

Status of Prior Findings

The University has not taken adequate corrective action with respect to the previously reportedfindings listed below. Accordingly, we included these findings in the section entitled, “Internal Control andCompliance Findings and Recommendations.”

• Complete Implementation of Information Security Plan

• Develop a Business Plan for Auxiliary Enterprises

The University has taken adequate corrective action with respect to audit findings reported in theprior year that are not repeated in this report.

We discussed this report with management at an exit conference held on June 17, 1999. This report isfor the information of the Governor and General Assembly, Board of Visitors, audit committee, management,and the people of the Commonwealth of Virginia and is a public record.

AUDITOR OF PUBLIC ACCOUNTSMSM:jldjld:

INTERNAL CONTROL AND COMPLIANCE FINDINGS AND RECOMMENDATIONS

Status of Information Systems Projects

The University implemented Student Information System Plus in January 1999 with no majorproblems. It includes the following sections:

• Billing• Registration• Admission• Faculty Module• Classroom Assignments

The University also purchased the additional modules of Housing, FAM Plus (Financial Aid) andWorld Wide Web access. The Housing module is in the testing phase, but no planned implementation datehas been determined. The vendor upgraded the FAM Plus module for new federal regulations andimplemented it in May 1999.

The University should incur significant cost savings, once it completes implementing the FAM Plusmodule, because it will no longer need to operate two systems, SAFE and FAM Plus, to process studentfinancial aid information. The World Wide Web access module will allow students and faculty advisors toaccess information through the Internet. The University has yet to implement this module because ofproblems found with the software.

During early fiscal year 1999, the University installed a new operating system on their mainframe,which houses the University’s critical applications. This operating system is the new VSE/ESA release that isYear 2000 compliant.

Complete Implementation of Information Security Program

The University has not completed the implementation of an information security program appropriatefor its information technology environment. The Council on Information Technology Resource ManagementStandard 95-1 requires that such a program include:

• A business impact analysis that identifies the University’s sensitive information systems;

• A risk assessment that identifies the risks to the sensitive information systems andcountermeasures required to reduce risks to an acceptable level;

• A contingency management plan that provides for the continuation of critical businessfunctions in the event of disruptions or disasters;

• Implementation of security safeguards based on the risk assessment; and,

• Security awareness and training programs.

The University has completed a Business Impact Analysis and a risk assessment. The University hasalso developed contingency plans; however, the plans are incomplete. In order to complete the contingencyplans, the University should allocate funds for purchase of a “Hotsite,” include an inventory of computerequipment, and include a value to acquire replacement equipment in the event of loss or damage. In addition,the University should include an inventory of telecommunications equipment with arrangements to resumetelecommunications in the event of a disaster. Further, once completed, the University should test and reviewthe contingency management plans on a periodic basis.

The University has developed a Security Awareness and Training Program. The program needs to beapproved, made mandatory, and documented as part of the University’s written policies and procedures.

The University should continue efforts to complete an information security program appropriate fortheir technology environment to ensure the integrity of all systems.

Improve Grant Activity Management

The University should improve the monitoring of grant activity. We found the following:

• Project Directors did not monitor budget versus actual expenditures.

• Project Directors did not properly submit budget increases.

• Grants and Contracts personnel are not performing proper closeout procedures oninactive grants with positive cash balances, nor removing inactive grants from theaccounting system timely.

The University should closely monitor its grants and ensure the accounting system has accurate budgetinformation. Further, the University should promptly determine the disposition of inactive federal accounts and,based on this review, make repayments or other needed transactions.

Develop a Business Plan for Auxiliary Enterprises

The University needs to develop and adopt a formal business plan for Auxiliary Enterprises. Thisplan needs to address the long-term strategies that the University plans to follow and should address thefollowing issues.

• Which individual enterprises will remain self-sustaining and those that will supportother activities.

• What philosophy management should follow in proposing fees.

• What are adequate operating, capital, and maintenance reserve balances, and the uses ofthese balances.

• Who has financial oversight and operational responsibilities.

• Under what circumstances will management consider both the contracting or internaloperation of an enterprise.

• What should management consider when determining if the University should add orabolish an enterprise.

The University does not have any operating or financial problems with its auxiliary enterprises.However, changes in the Commonwealth’s objectives for setting fees and the use of reserves for neededprojects indicate the need for a long-term business plan.

The State Council of Higher Education has directed the University to reexamine its methodology forallocating indirect costs to the auxiliary enterprises. The University has developed a work plan thatstrategizes an approach to developing a cost allocation method.

The University has identified funds to recruit for a cost accountant and Associate Vice-President forFaculties and Services who would lead the complete, comprehensive review of auxiliary enterprises and helpdevelop long-term strategies, policies, and procedures. Furthermore, the Director of Purchasing is workingwith the Dean of the School of Business to have business plans developed for auxiliary enterprises andsupport services as a class project for Fall 1999. The University should continue its efforts to follow throughwith these plans.

Purchase and Implement an Adequate Traffic System

The University needs to purchase and implement an adequate traffic management system. We foundthe following weaknesses in the University’s current traffic system.

• It does not interface with the Billings and Receivable system or the accounting system.

• No one reconciles the information keyed into the traffic system by the dispatcher andthe information keyed into the accounting system by the Cashier’s Office.

• There is no aging of receivables.

• There was no documentation to substantiate the year-end parking receivables.

The University should ensure that the traffic system interfaces with the Billings and Receivablessystem and the accounting system, and ages receivables. Staff should reconcile the accounting and trafficmanagement systems and retain proper documentation for the year-end receivables.

Improve Reconciliation Process

The University’s reconciliation process is very inefficient. It takes staff up to three weeks to completemonthly reconciliations due to the high quantity of reconciling items. An outdated Commonwealth’sAccounting and Reporting System (CARS) interface, timing, or other valid differences that the system cannoteasily identify cause most reconciling items. For the expenditure reconciliations, documentation wasinsufficient to determine if there was a proper disposition of all reconciling differences or that the reconciliationincluded all account balances in the analysis.

University personnel should retain adequate support for the reconciliation of all financial information.The University should allocate funds to update and correct the interface with the Commonwealth’s Accountingand Reporting System and develop a mechanism that would easily identify timing or valid differences. Theseimprovements would help to ensure a more efficient and less time consuming reconciliation process.

Properly Record and Support NCAA Activity

The Athletic Department did not provide adequate supporting documentation for athletic receipts. Inaddition, the Athletic Department did not report Virginia State University Booster Club gifts and contributionson the Schedule of Revenues and Expenditures of Intercollegiate Athletic Programs (the Schedule). Therefore,we could not perform certain agreed-upon procedures required by NCAA audit guidelines and the Scheduleunderstates revenues and expenditures by $9,522.

The Athletic Department should retain and provide all documentation supporting receipts. In addition,the Department should report all gifts and contributions to ensure accurate financial reporting. University policyrequires any University school, department, or program that receives a monetary gift to forward the gift the sameday to the Development Office for recording, deposit, and acknowledgement. The Athletic Department shouldfollow this policy.

COMPLIANCE MATTERS

Reconcile Financial Aid Programs

General Accounting and Financial Aid did not reconcile all financial aid programs between thefinancial aid, student accounts receivable, and general ledger systems on a monthly basis. The Universityonly completed year-end reconciliations five months after year-end. For the Direct Loan Program, out of totaldisbursements of $15,326,581 the University could not explain a difference of $293,667 between the generalledger and both the financial aid and the student accounts receivable systems. For Federal Work-Study, out oftotal disbursements of $540,658, the University could not explain a difference of $343 between the financialaid and student accounts receivable system. Management should require monthly reconciliations for allfinancial aid programs to determine that amounts on the various accounting systems properly reflect thedisbursements and to facilitate adequate monitoring of financial aid funds.

Establish Refund Policy For Unofficial Withdrawals

The University has no procedures to establish a withdrawal date and issue refunds for unofficialwithdrawals by students receiving financial aid. Consequently, the University did not issue refunds andretained the entire amount of financial aid awards for all unofficial withdrawals. The 1997-98 FederalStudent Financial Aid Handbook Chapter Three Section 4: Refunds and Repayments states that:“Participating SFA schools are expected to monitor student attendance for the purpose of determining awithdrawal date in case of unofficial withdrawal. The school must demonstrate that the student has remainedin academic attendance through a specified point in time. The school’s determination must be based on anevent that the school routinely monitors and must be confirmed by an employee of the school. If theseconditions are met, the following are acceptable forms of such documentation: exams, records of attendance,tutorials, computer-assisted instruction, counseling, academic advisement, or study groups.” The Universityshould establish procedures for the purposes of determining a withdrawal date for unofficial withdrawals andissue refunds to students receiving student financial aid.

VIRGINIA STATE UNIVERSITYBALANCE SHEETAs of June 30, 1998

EndowmentCurrent Funds and Similar Plant Agency

Unrestricted Restricted Loan Funds Funds Funds Funds TotalA S S E T S

Cash and cash equivalents (Note 2) 5,207,147$ 745,222$ 229,190$ -$ (1,178,557)$ 1,002,059$ 6,005,061$ Cash and investments with trustees (Note 2) 1,952,313 286,241 - 4,004,543 4,364,251 - 10,607,348 Investments held with the Treasurer of VA (Note 2) 404,289 - - - - 404,289 Appropriations available - 192,773 - - 2,787,419 - 2,980,192 Accounts and loans receivable (Net of allowance for doubtful accounts of $1,745,368) (Note 4) 559,171 2,747,643 717,104 - - 1,987 4,025,905 Interest receivable 2,337 4,426 - 3,121 - - 9,884 Due from other funds (Note 5) 983,530 67,384 - 47,847 279,992 - 1,378,753 Inventories 130,487 5,690 - - - 136,177 Prepaid expense 202,459 - - - - - 202,459 Investment in plant (Note 4) - - - - 128,086,541 - 128,086,541 Equity in Equipment Trust Fund - - - - 324,899 - 324,899 Other assets - - - - 64,159 - 64,159

Total assets 9,441,733$ 4,049,379$ 946,294$ 4,055,511$ 134,728,704$ 1,004,046$ 154,225,667$

LIABILITIES AND FUND BALANCES

Liabilities: Accounts payable 4,179,736$ 801,500$ 25,336$ -$ 177,661$ -$ 5,184,233$ Accrued compensated absences 1,867,181 516,736 - - - - 2,383,917 Deferred revenue 730,851 1,266,100 - - - - 1,996,951 Advance from the Treasurer of Virginia 7,000 - - - - - 7,000 Treasury loan payable (Note7) - - - - 1,046,000 - 1,046,000 Due to other funds (Note 5) 286,961 755,829 - - 335,963 - 1,378,753 Deposits pending distribution 32,922 - - - - - 32,922 Credit balances - student accounts 275,600 - - - - - 275,600 Obligations under securities lending (Note 2) 404,289 - - - - - 404,289 Interest payable - - - - 84,893 - 84,893 Retainage payable (Note 6) - - - - 210,098 - 210,098 Bonds payable (Note 8) - - - - 8,942,382 - 8,942,382 Notes payable (Note 8) - - - - 3,097,249 - 3,097,249 Capital lease obligation (Note 8) - - - - 2,372,655 - 2,372,655 Installment purchases (Note 8) - - - - 172,106 - 172,106 Other liabilities 247,792 - - - 632,007 1,004,046 1,883,845

Total liabilities 8,032,332 3,340,165 25,336 - 17,071,014 1,004,046 29,472,893

Fund balances: Unrestricted current funds - Undesignated (Note 10) (1,847,554) - - - - - (1,847,554) Unrestricted current funds - Board designated (Note 10) 3,008,954 - - - - - 3,008,954 Unrestricted current funds - HUD loan reserve(Note 10) 248,001 - - - - - 248,001 Restricted current funds - 709,214 - - - - 709,214 Loan funds, U.S. Government grants - - 631,259 - - - 631,259 Loan funds, University - Restricted - - 289,699 - - - 289,699 Endowment - - - 2,018,564 - - 2,018,564 Quasi-endowment - Unrestricted - - - 272,237 - - 272,237 Quasi-endowment - Restricted - - - 1,764,710 - - 1,764,710 Unexpended plant funds - Unrestricted - - - - 132,122 - 132,122 Renewals and replacements - Unrestricted - - - - 2,625,970 - 2,625,970 Retirement of indebtedness - Unrestricted - - - - 26,777 - 26,777 Net investment in plant - Unrestricted - - - - 114,872,821 - 114,872,821

Total fund balances 1,409,401 709,214 920,958 4,055,511 117,657,690 - 124,752,774

Total liabilities and fund balances 9,441,733$ 4,049,379$ 946,294$ 4,055,511$ 134,728,704$ 1,004,046$ 154,225,667$

The accompanying notes to financial statements are an integral part of this statement.

4

VIRGINIA STATE UNIVERSITYSTATEMENT OF CHANGES IN FUND BALANCESFor the Year Ended June 30, 1998

Endowment Plant FundsCurrent Funds and Similar Renewals and Retirement of Investment

Unrestricted Restricted Loan Funds Funds Unexpended Replacements Indebtedness in PlantRevenues and other additions:

Unrestricted current funds revenue 46,982,612$ -$ -$ -$ -$ -$ -$ -$ State appropriations - 2,816,368 - - - 521,716 424,813 21,822 Federal grants and contracts - 28,290,414 - - 101,683 - - - State grants and contracts - 787,874 - - - - - - Local grants and contracts - 40,750 - - - - - - Private gifts, grants and contracts - 288,660 - 307,926 - - - - Endowment income - 20,454 - 19,987 - - - - Investment income - 3,545 10,583 1,101,760 - 334,377 - - Interest on loans receivable - - 53,898 - - - - - Retirement of indebtedness - - - - - - - 1,082,546 Expended for plant facilities (Including $1,852,300 charged to current funds) - - - - - - - 3,206,626 Other sources - - 182,179 - - 48,783 - -

Total revenues and other additions 46,982,612 32,248,065 246,660 1,429,673 101,683 904,876 424,813 4,310,994

Expenditures and other deductions:Educational and general expenditures 33,030,520 31,398,174 - - - - - - Auxiliary enterprise expenditures 11,016,785 246,304 - - - - - - Indirect costs recovered - 293,278 - - - - - - Administrative costs - - 53,855 - - - - - Loan cancellations - - 8,479 - - - - - Expended for plant facilities (Including non-capitalized expenditures of $548,573) - - - - 656,950 1,245,949 - - Refunded to grantors - 8,418 - - - - - - Retirement of indebtedness - - - - - - 1,082,546 - Interest on indebtedness - - - - - - 686,939 - Retirement of plant facilities - - - - - - - 505,525 Reversions to General Fund of the Commonwealth - - - - 889 631,122 - -

Total expenditures and other deductions 44,047,305 31,946,174 62,334 - 657,839 1,877,071 1,769,485 505,525

Transfers among funds - Additions/(Deductions): Operating transfer out to primary government (26,027) - - - - - - - Mandatory - debt service (1,341,511) - - - - - 1,341,511 - Nonmandatory 472,256 169,826 - (923,556) 42,057 281,816 (25,294) (17,105)

Total transfers among funds (895,282) 169,826 - (923,556) 42,057 281,816 1,316,217 (17,105)

Net increase (decrease) for the year 2,040,025 471,717 184,326 506,117 (514,099) (690,379) (28,455) 3,788,364

Fund balances (deficits) at beginning of year as adjusted (Note 9) (630,624) 237,497 736,632 3,549,394 646,221 3,316,349 55,232 111,084,457

Fund balances at end of year 1,409,401$ 709,214$ 920,958$ 4,055,511$ 132,122$ 2,625,970$ 26,777$ 114,872,821$

The accompanying notes to financial statements are an integral part of this statement.

6

VIRGINIA STATE UNIVERSITYSTATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES, AND OTHER CHANGESFor the Year Ended June 30, 1998

Unrestricted Restricted TotalRevenues:

Student tuition and fees 12,962,133$ -$ 12,962,133$ State appropriations 18,009,790 2,623,595 20,633,385 Federal grants and contracts 293,278 27,879,600 28,172,878 State grants and contracts - 787,874 787,874 Local grants and contracts - 40,750 40,750 Private gifts, grants and contracts 157,111 288,660 445,771 Sales and services of auxiliary enterprises 14,559,466 - 14,559,466 Sales and services of educational departments 28,636 - 28,636 Endowment income 43,813 20,454 64,267 Investment income 200,348 3,545 203,893 Proceeds-Securities lending 15,345 - 15,345 Other sources 712,692 - 712,692

Total current revenues 46,982,612 31,644,478 78,627,090

Expenditures and mandatory transfers:Educational and general:

Instruction 13,894,234 271,901 14,166,135 Research 455,740 2,818,153 3,273,893 Public service 548,914 3,130,942 3,679,856 Academic support 2,909,824 957,752 3,867,576 Student services 2,607,595 773,261 3,380,856 Institutional support 5,793,534 352,089 6,145,623 Operation and maintenance of plant 6,513,960 523,844 7,037,804 Scholarships and fellowships 306,719 22,570,232 22,876,951

Educational and general expenditures 33,030,520 31,398,174 64,428,694

Mandatory transfer for debt service 41,789 - 41,789

Total educational and general 33,072,309 31,398,174 64,470,483

Auxiliary enterprises:Operating expenditures 11,001,780 246,304 11,248,084 Payments-Securities lending 15,005 - 15,005 Mandatory transfers for debt service 1,299,722 - 1,299,722

Total auxiliary enterprises 12,316,507 246,304 12,562,811

Operating transfers to primary government 26,027 - 26,027

Total expenditures and mandatory transfers 45,414,843 31,644,478 77,059,321

Other transfers and additions/(deductions):Excess of restricted receipts over transfers to revenue - 310,309 310,309 Refunded to grantors - (8,418) (8,418) Nonmandatory transfers 472,256 169,826 642,082

Net increase in fund balances 2,040,025$ 471,717$ 2,511,742$

The accompanying notes to financial statements are an integral part of this statement.

8

VIRGINIA STATE UNIVERSITY

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity

Virginia State University, founded in 1882, is one of two land grant Universities inthe state, having been so designated in 1920. As a land grant institution, the Universityengages in natural resources-related research projects and agricultural extension services.The institution attained University status in 1979. The University offers instructionalprograms at the graduate and undergraduate levels in science, education, humanities, socialscience, and business. The University’s stated mission is to prepare students to advanceintellectually, socially, economically, and politically so they and the University will makesignificant contributions to the enhancement of society.

A separate report is prepared for the Commonwealth of Virginia which includes allagencies, boards, commissions, and authorities over which the Commonwealth exercises orhas the ability to exercise oversight authority. Since the University is a component unit of theCommonwealth of Virginia, it is included in the Comprehensive Annual Financial Report ofthe Commonwealth.

B. Fund Accounting

To ensure observance of limitations and restrictions placed on the use of resources, theaccounts are maintained in accordance with the principles of “fund accounting.” Resources areclassified for accounting and reporting purposes into funds that may be used for the activities orobjectives specified. Separate accounts are maintained for each fund. Funds having similarcharacteristics have been combined into fund groups. Accordingly, all financial transactionshave been recorded and reported by fund group.

Within each fund group, fund balances restricted by outside sources are so indicatedand are distinguished from unrestricted funds allocated for specific purposes by action of theBoard of Visitors. Externally restricted funds may be utilized only in accordance with thepurposes established by the source of such funds and are in contrast with unrestricted funds, ofwhich the governing board retains full control to use in achieving any of its institutionalpurposes.

Unrestricted revenue is accounted for in the Current Unrestricted Fund. Restrictedgifts, grants, appropriations, and other restricted resources are accounted for in the appropriaterestricted funds. Revenues from current restricted funds are recognized when expenditures areincurred for current operating purposes.

Endowment and similar funds record the usage of income from moneys subject to therestrictions of gift instruments requiring, in perpetuity, that the principal be invested and incomeonly be utilized. Certain funds within this classification differ from regular endowments in thatany portion of the funds may be expended at the discretion of the Board of Visitors.

C. Basis of Accounting

The financial statements of the University have been prepared on the accrual basisexcept for depreciation expenses relating to capitalized fixed assets which are not recorded. Thestatement of current funds revenues, expenditures, and other changes is a statement of financialactivities of current funds related to the current reporting period and does not purport to presentthe results of operations or the net income or loss for the period as would a statement of incomeor a statement of revenues and expenses.

D. Investments

Investments are recorded at fair market value at June 30, 1998. This is a change inaccounting principle from year ending June 30, 1997, whereby investments were valued at cost.

E. Plant Funds

Plant assets consisting of land, building, improvements, equipment, and construction inprogress are stated at appraised historical cost or actual cost where determinable. Library booksare valued at replacement cost as determined by the State Council of Higher Education.Equipment expenditures are capitalized when the acquisition cost is $5,000 or greater and theestimated useful life is one year or more. Expenditures for construction in progress arecapitalized as incurred and reflected in net investment in plant. No provision is made in theaccounts for depreciation of plant assets. Current funds used to finance plant assets areaccounted for as expenditures for the normal replacement of movable equipment and librarybooks; mandatory transfers for required provisions for debt service; and transfers of a non-mandatory nature for all other cases.

F. Inventory

Inventory is valued at the lower of cost or market. The inventory held by theUniversity consists of supplies held for consumption.

G. Deferred Revenue

Deferred revenue represents moneys received but not earned as of June 30, 1998. Inthe Current Unrestricted Fund, deferred revenue represents student tuition and fees receivedin advance of the academic term. In the Current Restricted Fund, deferred revenue representsfederal funds received, but not spent.

H. Accrued Compensated Absences

The amount of leave earned but not taken by University employees is recorded as aliability on the balance sheet. The amount reflects, as of June 30, 1998 all unused vacationleave, compensatory leave, and the amount payable upon termination under theCommonwealth of Virginia’s sick leave pay out policy. The applicable share of employerrelated taxes payable on the eventual termination payments is also included.

2. AFFILIATED ORGANIZATION

The Virginia State University Foundation is separately incorporated and managed by its ownBoard. Assets and liabilities of the Foundation are not included in these statements. The Foundationwas organized for fund raising activities, which support the University.

The following is a condensed summary of the financial position of the Foundation as of June30, 1998. This information is not audited.

ASSETS

Cash and other assets $ 458,541Investments 2,925,981

Total Assets $ 3,384,522

LIABILITIES AND NET ASSETS

Total liabilities $ 18,625Total net assets 3,365,897

Total liabilities and Total net assets $ 3,384,522

3. CASH AND INVESTMENTS

All state funds of the University are held by the Treasurer of Virginia pursuant to Section 2.1-177, et seq., Code of Virginia, who is responsible for the collection, disbursement, custody andinvestment of state funds. Each fund’s equity in pooled state funds is reported as “Cash” on thebalance sheet and is not categorized as to credit risk. Cash deposits held by the University aremaintained in accounts covered by federal depository insurance or collateralized in accordance withthe Virginia Security for Public Deposits Act. At June 30, 1998, the carrying amount of cash was$3,826,930.

Statutes authorize the investment of funds held by the University in obligations of theCommonwealth, federal government, other states or political subdivisions thereof, Virginia politicalsubdivisions, the International Bank for Reconstruction and Development, the Asian DevelopmentBank, and the African Development Bank. In addition, the University may invest in prime qualitycommercial paper rated prime 1 by Moody’s Investment Service or A-1 by Standard and Poor’sIncorporated. The University may also invest in overnight term or open repurchase agreements andmoney market funds comprised of investments which are otherwise legal investments of theUniversity.

The University’s investments are categorized below to give an indication of the level of creditrisk assumed by the University at June 30, 1998. Credit risk is the risk that the University may not beable to obtain possession of its investment instrument or collateral at maturity. Risk category 1includes investments which are insured or registered or for which the securities are held by theUniversity, or its safekeeping agent in the University’s name. Risk category 2 includes uninsured orunregistered investments for which the securities are held by the broker’s or dealer’s trust departmentor safekeeping agent in the University’s name. Risk category 3 includes uninsured or unregisteredinvestments for which the securities are held by the broker or dealer, or by its trust department orsafekeeping agent, but not in the University’s name.

The composition and categorization of investments held by the University at June 30, 1998, follows:

Category MarketDescription 1 Cost Value

Investment: U.S. Government Bonds $ 1,426,774 $ 1,426,774 $ 1,457,799 Corporate Bonds 1,939 1,939 3,105 Cooperate Stock 2,366,859 2,366,859 4,654,373 State Non-arbitrage Program 4,364,251 4,364,251 4,364,251 Money Market Funds 127,820 127,820 127,820

Subtotal 8,287,643 8,287,643 10,607,348

Money Market Funds 2,178,131 2,178,131

Total Investments $ 10,465,774 $ 12,785,479

Investments held by the Treasurer of Virginia represent the University’s allocated share ofsecurities received for securities lending transactions held in the General Account of theCommonwealth. Information related to the credit risk of these investments and securities lendingtransactions held in the General Account is available on a statewide level in the Commonwealth ofVirginia’s Comprehensive Annual Financial Report.

4. BALANCE SHEET DETAILS

Accounts Receivable

Unrestricted current funds: Student and other receivables (less allowance of $146,033 ) $ 559,171

Restricted current funds: Grants and contracts and other receivables 2,747,643

Loan funds: Notes receivable (less allowance of $1,599,335) 717,104

Agency funds: Other receivables 1,987

Total receivables $ 4,025,905

Investment in Plant

Land $ 267,084Improvements 8,260,834Buildings 69,750,623Equipment 17,261,670Library Books 11,471,592Construction in Progress 21,074,738

Total investment in plant $ 128,086,541

5. DUE TO/FROM OTHER FUNDS

Due to Other Funds are amounts owed by one fund to another fund for goods purchased orservices obtained. Due from Other Funds are amounts to be received from one fund by another fundfor goods sold or services rendered.

Payable Fund:Receivable Fund: Unrestricted Restricted Plant Totals

Unrestricted $ - $ 647,567 $ 335,963 $ 983,530Restricted 67,384 - - 67,384Endowment 47,847 - - 47,847Plant 171,730 108,262 - 279,992

Total $ 286,961 $ 755,829 $ 335,963 $ 1,378,753

6. RETAINAGE PAYABLE

At June 30, 1998, $210,098 was held by the University as retainage on various contracts forwork which had been performed. The retainage will be remitted to the various contractors uponsatisfactory completion of the projects.

7. TREASURY LOAN

The University received a treasury loan of $1,046,000 for the renovation of Jones Dining Hallto cover expenses. Repayment will be made from the sale proceeds of 9 (c) revenue bonds. (See note16).

8. LONG-TERM INDEBTEDNESS

Long-term indebtedness at June 30, 1998 consists of the following:

Interest Rates Maturity Total General Obligation Revenue Bonds: Langston Hall Project, Series 1995 4.60-5.10% 2010 $ 2,230,000 Foster Hall Project, Series 1995 4.60-5.10% 2010 2,000,000 Dorm Renovation Project, Series 1995 4.60-5.10% 2010 2,325,000 Jones Dining Hall Project, Series 1996 5.375% 2016 2,350,000

Total bonds payable $ 8,905,000

A summary of future principal requirements of long-term debt as of June 30, 1998, follows:

Year Ending June 30 Total

1999 $ 505,0002000 525,0002001 550,0002002 575,0002003 605,000

Later Years 6,145,000

Total principal payments 8,905,000Add: Unamortized premium 40,248

Total $8,942,382

Loan From Department of Housing and Urban Development (HUD)

The University entered into a loan agreement with HUD in 1989 to borrow funds to repairseven dormitories. The loan is to be repaid over 30 years at 3 percent interest per annum, and issecured by a lien on the net revenues from the ownership, operation, and use of the seven dormitoriesunder repair. At June 30, 1998, the outstanding balance of the loan was $3,025,600.

A summary of future principal and interest requirements as of June 30, 1998, follows:

Maturity Principal Interest Total

1999 $ 87,638 $ 90,116 $ 177,7542000 90,287 87,467 177,7542001 93,016 84,738 177,7542002 95,828 81,926 177,7542003 98,724 79,030 177,754

Later Years 2,560,107 817,220 3,377,327

Total $3,025,600 $1,240,497 $4,266,097

Marriott Note Payable

The University entered into a contract with Marriott Management Services Corp. for thepurpose of providing a wide range of food services to the students, faculty, and staff. Marriott hascommitted to make available to the University the sum of $514,398 to be expended for remodeling ofJones Dining Hall, Foster Hall Snack Shop, and permanent installation of a kitchen facility in thePavilion. The contract requires repayment of $314,398 in quarterly payments excluding interest,which has been imputed at 6.5 percent. The remaining $200,000 of the investment is amortizedthrough the per meal plan costs and is included in the monthly contractual payments. The Universitywould bear the responsibility of repaying the unamortized balance of both amounts should thecontract be terminated prior to the end of its full five year term.

A summary of future principal and interest requirements as of June 30, 1998, follows:

Maturity Principal Interest Total

1999 $71,649 $2,934 $74,583

Higher Education Equipment Trust Fund Capital Lease Obligation

The University is committed under capital lease agreements with the Virginia CollegeBuilding Authority (VCBA) in the combined principal amount of $2,372,655. The agreementsentered into in 1994, 1995, 1996, and 1997 will mature in fiscal years 1999, 2001, 2002, and 2003respectively with interest rates ranging from 3.50 percent to 5.35 percent. Under the terms of theleases, the University is authorized to purchase equipment from an approved list of equipment itemsin an amount not to exceed the principal amount of each lease. Payment of such purchases are to bereimbursed to the University or directly paid by the VCBA from the VCBA Equipment Trust Fundfinanced from the proceeds of bonds issued by the VCBA for such purposes. The General Assemblyhas appropriated from the General Fund of the Commonwealth amounts sufficient to repay principaland interest requirements under the lease agreements.

A summary of future principal and interest obligations as of June 30, 1998, follows:

Year Ending Capital LeaseJune 30 Obligations

1999 $ 632,3642000 595,8522001 631,9352002 544,9402003 248,507

Total principal and interest 2,653,598

Less: Interest 280,943

Total Capital Lease Obligations $2,372,655

Installment Purchases

The University has entered into an installment purchase contract to finance the acquisition ofcopiers. The length of the purchase agreement is for three years, and the interest rate ranges from 4.4 to5.1 percent. Principal and interest payments of these commitments for fiscal years subsequent to June30, 1998 are as follows:

Year Principal Interest Total

1999 $ 74,609 $6,267 $ 80,8762000 67,325 2,942 70,2672001 30,172 459 30,631

Total $172,106 $9,668 $181,774

9. RESTATEMENT OF BEGINNING FUND BALANCES

During fiscal year 1998, the Commonwealth implemented GASB Statement No. 31,Accounting and Financial Reporting for Certain Investments and for External Investment Pools.Accordingly, the July 1, 1997, fund balances have been adjusted to report the fair value of investmentsheld at June 30, 1997. The following schedule details these changes.

Current Funds Endowment and Unrestricted Restricted Similar Funds

Balance as of June 30, 1997 as previously reported $(1,614,178) $160,189 $3,376,509

Restatement For GASB 31 983,554 77,308 172,885

Fund balance June 30, 1997 as restated $ (630,624) $237,497 $3,549,394

10. FUND BALANCES – CURRENT FUNDS – UNRESTRICTED

Virginia State University is a state-supported university of the Commonwealth of Virginia.Virginia law requires that the unexpended cash balance in the educational and general fund bereverted to the state general fund at the end of the fiscal year without provision for accrued expenses.Accruals for accounts payable and leave liability significantly contributed to the negative balance inundesignated fund balance at June 30, 1998.

As of June 30, 1998, unrestricted fund balances totaling $3,008,954 has been designated bythe Board of Visitors for plant replacement, expansion, and improvement. In addition, $248,001 is arequired reserve to the Housing and Urban Development loan.

11. STATE APPROPRIATIONS – CURRENT FUNDS – UNRESTRICTED

The University receives state appropriations from the General Fund of the Commonwealth.The Appropriation Act specifies that such unexpended appropriations shall revert, as specificallyprovided by the General Assembly, at the end of the biennium. For years ending at the middle of thebiennium, unexpended appropriations that have not been approved for re-appropriation in the nextyear by the Governor become part of the General Fund of the Commonwealth and are, therefore, nolonger available to the University for disbursements.

The following is a summary of state appropriations received by the University for the yearended June 30, 1998.

Current Unrestricted

Original Appropriation $17,933,149

Adjustments:Agriculture scholarships and fellowships 15,000Central account distribution 299,246Reappropriation 316,680Reversion to the General Fund of the Commonwealth (554,285)

Adjusted Appropriations $18,009,790

12. DIRECT STUDENT LOAN PROGRAM

On July 1, 1995, the University entered the Federal Direct Student Loan Program. Thisprogram replaces the Federal Stafford and PLUS Loan Programs which involve a private lender/bankor a guarantee agency. Under the Federal Direct Student Loan Program, students borrow directlyfrom the federal government with the University acting as the processing and delivery point of thefunds. At June 30, 1998, federal grant and contract revenue and expenditures for scholarships andfellowships included $15,376,817 related to this program.

13. COMMITMENTS

Operating Leases

The University is committed under various operating leases for equipment. In most cases, theUniversity expects that in the normal course of business, these leases will be replaced by similarleases. Rental expenses for the fiscal year ended June 30, 1998, were $53,505.

As of June 30, 1998, the University had total future minimum rental payments due of $7,296under the above leases for fiscal year 1999.

14. PENSION PLAN AND OTHER POST RETIREMENT BENEFITS

Employees of the University are employees of the Commonwealth. The employeesparticipate in a defined benefit pension plan administered by the Virginia Retirement System (VRS).The VRS also administers life insurance and health related plans for retired employees. Informationrelating to these plans is available at the statewide level only in the Commonwealth of Virginia’sComprehensive Annual Financial Report (CAFR). The Commonwealth, not Virginia StateUniversity, has overall responsibility for contributions to these plans.

Full-time faculty and certain administrative staff participate in Optional Retirement Plans.These retirement annuity programs are through TIAA/CREF, VALIC, Fidelity Investment InsuranceCompanies and T. Rowe Price. These are fixed-contribution programs where the retirement benefitsreceived are based upon the employer, 5.4 percent, and employee, 5 percent, contributions (all ofwhich are paid by the University) plus interest and dividends.

Individual contracts issued under the plans provide for full and immediate vesting of both theUniversity’s and the employee’s contributions. Contributions to these programs were calculated usinga base salary amount of $3,307,404. Total pension costs under these plans were approximately$342,837 for the year ended June 30, 1998.

15. STATE STUDENT LOANS

The University makes loans to qualified students from its Commonwealth of Virginia StudentLoan Fund. At June 30, 1998, the balance of the State Student Loan Fund was $51,955 of cash.

16. SUBSEQUENT EVENTS

On September 16, 1998, the University participated in the issuance of Commonwealth ofVirginia General Obligation Bonds, Series 1998, pursuant to Section 9 of Article 10 of theConstitution of Virginia in the amount of $1,045,000. Section 9(c) bonds are backed by the full faith,credit and taxing power of the Commonwealth, and are issued to finance capital projects which, whencompleted, will generate revenue to repay debt. This debt was incurred to retire the short term loanreceived from the Department of Treasury in the amount of $1,046,000 for Jones Dinning Hall. Thecomposite interest rate on this issuance is 4.5 percent and the debt matures on June 1, 2018.

The University has entered into an installment purchase contract in the amount of $410,000 tofinance the acquisition of mainframe equipment. The length of the purchase agreement is for threeyears and the interest rate is 4.3 percent.

The University is a defendant in several legal actions. While the final outcome cannot bedetermined at this time, management is of the opinion that the liability, if any, for these legal actionswill not have a material effect on the University's financial position.

17. CONTINGENT LIABILITIES

Federal programs in which the University participates were included in the Commonwealthof Virginia’s Statewide Single Audit and audited in accordance with the provisions of the U.S. Officeof Management and Budget Circular A-133, Audits of States, Local Governments, and Non-ProfitOrganizations. Pursuant to the provisions of Circular A-133, all major programs were tested forcompliance with applicable grant requirements. The provisions of this Circular do not limit theauthority of federal agencies or other federal audit officials to make, or contract for, audits andevaluations of federal financial assistance programs. As a result, final expenditure reports of grantsand contracts submitted to granting agencies in current and prior years are subject to audit andadjustment by such agencies.

The University’s Federal Perkins Loan Program’s cohort default rate exceeded the maximumlevel set by the U.S. Department of Education (DOE). As a result, the University receivedprovisional certification from the DOE for participation in the Title IV Student Financial AidPrograms for fiscal years 1997 through 1999. Under provisional certification, the University isallowed to operate as if it had full certification; however, it cannot expand its current program.During the period of provisional certification, the participation of the University will be subject torevocation for cause. Also, it is unlikely the University will receive an additional federal capitalcontribution for the Federal Perkins Loan Program during the provisional certification period. TheUniversity will not be denied participation in the Title IV Program solely due to a high default rate.

18. YEAR 2000 COMPLIANCE

The University’s work to address the Year 2000 phenomenon includes the following phases:

Awareness – Define the Year 2000 problem and gain executive level support andsponsorship. Establish Year 2000 project team and develop an overall strategy. Ensure thateveryone in the University is fully aware of the issue.

Assessment – Assess the Year 2000 impact on the University. Identify priority businessactivities; inventory and analyze systems supporting these activities, and prioritize theirconversion or replacement. Develop contingency plans to handle potential system failures.Identify and secure the necessary resources.

Remediation – Convert, replace, or eliminate selected systems. Modify interfaces.

Testing and Validation – Test, verify, and validate converted or replaced systems. Test theperformance, functionality, and integration of these systems and interfaces in an operationalenvironment.

Implementation – Implement converted or replaced systems and interfaces. Implementcontingency plans if necessary.

The University has established a task force to oversee specific technical efforts associatedwith addressing the Year 2000 phenomenon, and to assist with meeting the requirements of theCommonwealth of Virginia. Members of the task force, and others at the University have cometogether and/or consulted with each other to ensure that the University is properly addressing how theYear 2000 phenomenon might effect its priority business activities. The Year 2000 Task Forcesought to ensure that all flows within each priority business activity were properly identified, thatindividual activity elements which could be impacted were properly addressed to protect theUniversity’s interests, and that a reasonable contingency plan was designed.

Priority business activities have been divided into the following two categories and a Year2000 plan and risk assessment developed:

Instruction and Research – These activities include all instructional and academic supportactivities and all support systems that are directly affiliated with the admission, registration,and monitoring of student academic performance through graduation.

Student and Public Services – The focus of the university’s attention on its student andpublic services priority business activity is on ensuring the continuous providing of dining,residence halls and a wide variety of other students services, to include athletics, healthcare,student activities, counseling, and cultural activities. The principal focus is on basic servicessuch as heat, electricity, and basic technological support unique to student services. Thispriority business activity also focuses on the University’s role within the community as animportant institution within Chesterfield County and the Tri-cities area.

The University’s assigned risk factors, as set forth in the Year 2000 plan, represent subjective,but carefully conceived, evaluations of either the preparedness of the University, the preparedness ofother agencies within the Commonwealth, or the preparedness of University suppliers and vendors,together with options for actions on part of the University that are currently being exercised.

Funds have been appropriated, for the period of July 1, 1998 through June 30, 2000, by the1998 General Assembly in the amount of $410,000 to provide consultative resources and goods andservices that are critical and necessary to completing changes, modifications, and replacements thatensure that the Year 2000 phenomenon does not adversely impact the priority business activities of theUniversity. The University expended $50,000, for the fiscal year ending June 30, 1998, principally oninstalling a new Year 2000 compliant mainframe computer. The University has also expendedapproximately $182,000 and has an additional commitment to spend $227,000 under a long termcontract for systems support and assistance for Systems & Computer Technology Corp. toward theimplementation of a new Year 2000 compliant version of the Student Information System.

The University has begun the remediation stage for the two remaining systems conversionsthat are necessary to ensure that there is no adverse impact on business activities due to the Year 2000phenomenon. The energies of the management and staff of the University over the next three to fivemonths will be almost exclusively devoted toward completing the conversion to the Year 2000compliant version of Financial Records System and the implementation of the Year 2000 compliantStudent Information System. These efforts will then be immediately followed by attention to puttinginto place all contingency plans documented in the Year 2000 Plant Summary for Priority BusinessActivities. Work on the contingency plans will begin approximately in February 1999 and culminatein the Fall of 1999.

19. SURETY BOND

The University’s employees were covered by a Faithful Performance Duty Bond administeredby the Commonwealth of Virginia’s Department of General Services, Division of Risk Management,with liability limits of $500,000 for each occurrence. Information relating to the Commonwealth’s self-insurance plans is available at the statewide level in the Commonwealth of Virginia’s ComprehensiveAnnual Financial Report.

VIRGINIA STATE UNIVERSITYSCHEDULE OF AUXILIARY ENTERPRISES REVENUES,EXPENDITURES, AND CHANGES IN FUND BALANCESFor the Year Ended June 30, 1998

Parking Student Student Union OtherFood Residential & Tele- Health & Recreational Auxiliary Intercollegiate

Services Bookstore Facilities Transportation Communication Services Facilities Functions Athletics Reserves TotalRevenues: Student fees 3,634,771$ -$ 4,890,910$ -$ -$ 418,084$ 971,228$ 504,778$ 1,501,325$ 874,352$ 12,795,448$ Sales and service 39,753 144,653 326,477 167,503 149,707 20,849 13,707 569,164 169,429 - 1,601,242 Interest revenue - - - - - - - 178,121 - - 178,121

Total revenues 3,674,524 144,653 5,217,387 167,503 149,707 438,933 984,935 1,252,063 1,670,754 874,352 14,574,811

Operating expenditures: Personal services 620 (177) 555,364 59,372 55,320 174,073 376,902 685,078 454,748 - 2,361,300 Employee benefits 316 212 135,249 17,119 13,803 55,505 83,406 197,016 107,819 - 610,445 Contractual services 2,211,220 7,957 1,072,856 (11,872) 195,384 57,208 128,077 222,731 238,299 - 4,121,860 Supplies and materials 21,034 2,671 95,761 (20,772) 273 (503) 7,592 73,903 97,213 - 277,172 Property and improvement - - - 513 - - - 360 12,567 - 13,440 Equipment 11,393 - 288,760 107 8,812 3,425 25,907 172,100 16,664 - 527,168 Current charges and obligations 19,004 - 55,526 9,296 - 194 5,886 55,390 53,006 - 198,302 Scholarships - 3,700 353,432 - - - 76,834 252,807 376,139 - 1,062,912 Transfer payments (231) (34) - - - - - 635 83 - 453 Unemployment compensation 427 - 5,882 - - - 168 997 10,752 - 18,226 Individual claims and settlement 230 34 - - - 546 - - - - 810 Indirect cost 514,873 3,406 469,770 (10,674) 54,482 59,990 152,152 266,763 297,988 - 1,808,750 Miscellaneous 837 - - - - - - 15,110 - - 15,947

Total operating expenses 2,779,723 17,769 3,032,600 43,089 328,074 350,438 856,924 1,942,890 1,665,278 - 11,016,785

Excess (deficiency) of revenues over (under) operating expenditures before transfers 894,801 126,884 2,184,787 124,414 (178,367) 88,495 128,011 (690,827) 5,476 874,352 3,558,026

Transfers to other funds: Mandatory transfers - Debt service (314,246) - (680,894) (22,882) - - (220,323) (61,377) - - (1,299,722) Nonmandatory transfers (565,951) (95,000) (1,394,404) - 177,576 (177) 0 693,442 (20,826) 892,230 (313,110)

Net increase (decrease) for the year 14,604$ 31,884$ 109,489$ 101,532$ (791)$ 88,318$ (92,312)$ (58,762)$ (15,350)$ 1,766,582$ 1,945,194

Fund balances (deficits) at beginning of year 110,661 84,288 (115,646) (78,075) (316,179) 166,942 (33,182) 187,400 126,372 1,490,372 1,622,954

Fund balances (deficits) at end of year 125,265$ 116,172$ (6,157)$ 23,457$ (316,970)$ 255,260$ (125,494)$ 128,638$ 111,022$ 3,256,954$ 3,568,148$

Note: Auxiliary fund balance at the beginning of the year was adjusted by $41,096 to properly reflect adjustmentsmade in the accounting system, but omitted from the Auxiliary schedules.

Note: Payment for Securities Lending Transactions in the amount of $15,345 are included here in"Other Auxiliary Functions" category. These are shown separately on the Statement of Current Fund Revenues, Expenditures,and Other Changes.

24

VIRGINIA STATE UNIVERSITYPetersburg, Virginia

June 30, 1998

BOARD OF VISITORS

Glen N. Jones, Rector

Alonzo E. Short, Jr., Vice Rector

Garland L. Bigley, Secretary

Thomas W. Darby T. W. TaylorJonathan F. Johnson Gary R. ThomsonMillard D. Smith, Jr. Michael L. TurnerDr. Preston M. Royster Mary P. Usry

ADMINISTRATIVE OFFICERS

Eddie N. Moore, Jr., President

Martha E. Dawson, Provost and Vice President for Academic Affairs

Edward J. Mazur, Vice President for Administration and Finance

Claud Flythe, Chief of Staff and Vice President for Student Affairs